Suppose that the government must undertake an irreversible policy decision regarding the extent of air pollution regulation. The government is making this decision in a situation of uncertainty, however. In particular, there is some probability p that the benefits will remain the same as they are this year for all future years, but there is some probability 1-p that benefits will be less in all future years. If we take into consideration the multiperiod aspects, should we err on the side of overregulation or underregulation, compared to what we would do in a single-period choice?
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- 53. The annual demand for Prizdol, a prescription drugmanufactured and marketed by the NuFeel Company,is normally distributed with mean 50,000 and standarddeviation 12,000. Assume that demand during each ofthe next 10 years is an independent random numberfrom this distribution. NuFeel needs to determine howlarge a Prizdol plant to build to maximize its expectedprofit over the next 10 years. If the company builds aplant that can produce x units of Prizdol per year, it willcost $16 for each of these x units. NuFeel will produceonly the amount demanded each year, and each unit ofPrizdol produced will sell for $3.70. Each unit of Prizdol produced incurs a variable production cost of $0.20.It costs $0.40 per year to operate a unit of capacity.a. Among the capacity levels of 30,000, 35,000,40,000, 45,000, 50,000, 55,000, and 60,000 unitsper year, which level maximizes expected profit?Use simulation to answer this question.b. Using the capacity from your answer to part a,NuFeel can be 95%…A water company owns water pipes that burst often due to poor maintenance. The company can invest GHS m in the maintenance of the pipes. More maintenance means less water loss through bursts and fewer compensation payments to residents due to flooding of their properties. Assume that the value of lost water is 1/m so that more maintenance reduces the amount of loss. Assume that the value of damage to properties where the pipes are routed is 3/m , so that more maintenance decreases the amount of damage to properties. (i.) What is the socially optimal level of maintenance, m? What is the associated value of lost water and property damage? (Note: Minimize the total cost function) ( ii). What level of m is chosen when pipes that burst run through land owned by the government (the company pays nothing for damages even though there is still some damage associated with pipe bursts)? What is the new value for property damage? What is the deadweight loss?The problems with e.g."Acid rain" created by emissions of sulfur dioxide has been onemajor problem in Sweden, not least because emissions have occurred in other countries (eg England and Denmark) andthen transported here. Now assume that if one tonne of sulfur is emitted in England, it results in one (1) gram of sulfur deposition in Sweden. The corresponding deposit of one tonne of sulfur emissions in Denmark is assumed to be 3 grams. Suppose further that The socio-economic damage of one gram of sulfur deposit can be estimated at SEK 0.10.The marginal cost of reduce sulfur emissions in England is estimated at Z SEK per tonne, and in Denmark the equivalent is estimatedcost to 2Z SEK per tonne. Z indicates here the emission reduction in tonnes (eg in Denmark it would cost SEK 4 toreduce emissions by two tonnes). In other words, Z = 0 corresponds to the emission level where there is no reductionemissions occur. a) Suppose now that the European Union decides that Denmark and England…
- s ae o .co7 .0o 0.00m 1.000 2.000 .000 4.000 s.000 6.000 7 oos s.c00 s.c00.000 Oae 0e 3.000 4.000 s.000 .000 7 p00 .0000ce s0.000 1.000 2.000 3.000 4.000 6.000 6.000 7.000 8.000 9.000 10.000 (Figure: Market Supply Curve) The Accompanying graph contain individual supply curves for the only two firms in a market. Which of the market supply curve is correct? Graph D O None of these options is correct. O Graph C O Graph B O Graph AGive typing answer with explanation and conclusion Suppose that the government must undertake an irreversible policy decision regarding the extent of air pollution regulation. The government is making this decision in a situation of uncertainty, however. In particular, there is some probability p that the benefits will remain the same as they are this year for all future years, but there is some probability 1 - p that benefits will be less in all future years. If we take into consideration the multiperiod aspects, should we err on the side of overregulation or underregulation, compared to what we would do in a single-period choice?For all parts of this question, assume that the log of GDP per capita is normally distributed with a mean of 8.7 and standard devistion of 1.5Step 1 of 4: If the log of the world distribution of income is normaly distributed with a mean of 8.7 and a standard deviation of 1.5, what income indollars) marks the 90th percentile? KeypadAnswer A 71.325B 1.29C 41,253D 10.63
- Pisa Pizza, a seller of frozen pizza, is considering introducting a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of new pizza will be $20 million per year. While many of these sales will be to new customers, Pisa Pizza estimaes that 40% will come from customers who switch to the new, healthier pizzai nstead of buying the original version. a) Assume cusotmer will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza? b) Suppose that 50% of hte cusomters who will switch from Pisa Pizza's orignial pizza to its healthier pizza will switch to another brand if Pisa PIzza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this case?Q4: An investor invests $1000 a month, on average, in a stock market security. Because the investor must wait for good "buy" opportunity, the actual time of purchase is random. The investor usu- ally keeps the securities for about 3 years on the average but will sell at random times when a good "sell" opportunity presents itself. Although the investor is generally recognized as a shrewd stock market player, past experience indicates that about 25% of the securities decline at about 20% a year. The remaining 75% appreciate at the rate of about 12% a year. Estimate the inves- tor's (long-run) average equity in the stock market. Hint: use the average number of securities in the market.Jan '20 0.68 Feb '20 0.76 Mar '20 1.6 Apr '20 1.47 May '20 0.98 Jun '20 1.18 Jul '20 3.59 Aug '20 3.33 Sept '20 4.31 Oct '20 3.84 Nov '20 6.97 Dec '20 7.7 Using data above please provide one qualitative and two quantitative (Simple and weighted moving average) monthly forecasts in the United States for the holiday season in 2021
- Can you explain what these two belows mean in regard of GMM and Maximum likelihood. What are we calculating and what is it used to Unconstrained optimizationConstrained optimizatioSuppose the market for auto insurance is made of up two types of buyers: high-risk and low-risk. Buyers’ willingness to pay (WTP) for auto insurance plans, and sellers’ willingness to accept (WTA) when selling plans to each type of buyer, are outlined in a photo Assume now that there is asymmetric information and that insurance companies do not knowhow risky an individual buyer is. In the face of this uncertainty, they determine that the probability that a “walk-in” is high-risk is 0.75. What is the minimum price sellers are willing to accept when selling aninsurance plan? At this price, will low- and high-risk buyers both be willing to purchase this insurance plan? Explain. Be sure the mention adverse selection in your answer. Returning to the conditions outlined in Q1, suppose that buyers of auto insurance (high- and low-risk) were offered a $1,000 subsidy to purchase coverage. This would raise their WTP by $1,000. Would the market for both insurance plans clear after the…A farmer believes there is an equal chance that the next growing season will be abnormallyrainy. His expected return function has the formExpected return = 0.5lnYNR + 0.5lnYRwhere YNR and YR represent the farmer’s income in the states of “normal rain”and “rainy,” respectively.Suppose the farmer must choose between two crops that promise the following incomeprospects:Crop YNR YRMaize $14,000 $5,000Cotton $9,500 $7,500a) Which of the crops will he plant?b) Suppose the farmer can plant half his field with each crop. Would he choose to do so?Explain your result.c) What mix of Maize and Cotton would provide maximum expected utility to this farmer?d) Would Maize crop insurance, available to farmers who grow only Maize, which costs$2,000 and pays off $4,000 in the event of a rainy growing season, cause this farmer tochange what he plants?